Commercial development is slowly taking root and residential sales along the corridor have seen a slight uptick. However, real estate experts believe some seller's expectations are exceeding the reality of today's market.

The Capri Motel on Tulane Avenue, 41,000-square-feet of land just blocks away from the LSU/VA hospital construction site, was listed earlier this year for $3.2 million. It received considerable interest from national fast food and retail chains, but none of the offers came anywhere close to the asking price, said Robert Hand, owner of Louisiana Commercial Realty. The Capri's owners, Tsui Yu Chang and her brother Wen Chuan Chen, eventually took it off the market.

Hand was also the agent for the Patio Motel, one of the largest parcels of land on Tulane Avenue with nearly 30,000-square-feet of space. It was originally listed at $1.2 million, but Hand said he was forced to drop the price to $600,000 after the property was vandalized twice. Only then was he able to sell the hotel, abandoned since Hurricane Katrina, to the owners of the Capri in 2012. The new owners said they plan to invest nearly $3 million into the renovation of the Patio Motel and have a franchise agreement to turn it into a Quality Inn.

Story by
Richard Webster

Photos & video by
Ted Jackson

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Dan Swenson

Once that property is up and running and turning a profit, which Chen admitted may take several years, he said they intend to demolish the Capri and build a new, higher-quality hotel, such as a Hilton Gardens.

Many business owners along Tulane Avenue would like to see the low-rent motels sold and redeveloped because, according to the NOPD, they are magnets for crime. But owners like Chen and Chang don't have to accept any offer that comes their way, Hand said. If no one meets their asking price, they will continue to operate their businesses as they have for years.

"All these people were here long before the hospital was a gleam in someone's eye so it's not like they are desperate," Hand said. "And remember, many of these hotels like the Capri are family-owned businesses so it's an emotional decision as well. If they're going to sell they want enough money to buy a property somewhere else so they can put their family to work and have a livelihood."

Add to that the considerable gap between what sellers want to get and what buyers want to pay. Sellers are setting prices based on the the economic boom they believe will come with the future medical complex, but many buyers are looking at how they can make their potential business viable in the current conditions. Thus, Hand said he doesn't believe there will be a flurry of commercial development along Tulane Avenue in the near future.

That's not to say, however, that the commercial market is stagnant. Wampold Companies, a Baton Rouge developer, purchased the 13,000-square-foot Elks Place building one block off of Tulane Avenue in 2011 and recently announced it plans to spend $20 million converting the 17-story vacant office tower into 100 luxury apartments with 8,000-square-feet of retail space.

Last year, Campus Federal Credit Union purchased a plot of land at Tulane Avenue and South Galvez Street, directly adjacent to the medical complex site. The credit union paid $1.5 million or $43 per square foot, setting a new benchmark for future land sales along the Mid-City corridor, Hand said. In comparison, the Crystal Preserves hot sauce plant at 4235 Tulane Avenue sold in 2006 for $1.85 million, or $13 per square foot.

Residential sales have also picked up in Mid-City. But unlike commercial activity along Tulane Avenue, home sales are not being driven by the new hospitals, said Jo Ann Fitzpatrick with Latter & Blum Realtors. She said home buyers consider other quality of life issues, such as proximity to City Park, Bayou St. John, the New Orleans Museum of Art and grocery stores.

"Commercial sales are more investment driven rather than quality of life. It's not as much an emotional purchase," Fitzpatrick said. "But a homebuyer looks at a house and asks, 'Is this a place I want to call home? Is this somewhere I will feel proud driving home to? Will I be happy here?' So I think if you took away the hospital there would still be a huge increase in residential sales."

There is a limited supply of houses for sale in the costlier neighborhoods of Mid-City so buyers have shown an increasing willingness to consider areas around Tulane Avenue that struggle with crime and blight, Fitzpatrick said - but only if the house is in exceptional condition.

Fitzpatrick pointed to five properties purchased and renovated since 2006 by investor Greg Lambert on South Rendon Street, just a few blocks from Tulane Avenue. The first house was on the market for six months and sold for $215,000 in 2009. The last house sold for $329,000 in 2012 before it was even placed on the market.

Meanwhile, a few blocks away is a house for sale in relatively poor condition. It is listed at $160,000 and has been on the market for more than a year but can't sell because it's an inferior product, Fitzpatrick said.

"Location-wise where Greg's properties are may not be attractive to buyers, but he made them into fantastic products that overcame people's objections to the neighborhood," Fitzpatrick said.

Multifamily residential development is one of the successful enterprises around Tulane Avenue. After Hurricane Katrina and before the medical complex became a sure thing, Matt Schwartz, principal of the Domain Companies, saw Tulane Avenue's potential. There were large parcels of land available, a rarity in New Orleans, and a wide variety of tax incentives that made large projects economically feasible.

Starting in 2009, Domain built four residential buildings and a shopping center in the area: the Crescent Club, the Preserve, the Meridian, and the Gold Seal Lofts. The total investment was $130 million and the result has been everything they hoped for, Schwartz said.

The combined 530 units at the four mixed-income buildings are 100 percent occupied, charging $1,000 for a 700-square-foot one-bedroom apartment and $1,500 for a 1,000-square-foot two-bedroom apartment.

"Post-Katrina we felt development in New Orleans will follow the course it had in other places - get housing pushing closer to downtown, retail services following and then amenities and support," Schwartz said. "There was a lot of questions whether the model was going to work on Tulane Avenue, but it's not only worked, our rents have continued to increase as additional development, including the medical district, has started downtown."